NEW YORK, July 26, 2026, 12:06 EDT — U.S. markets have closed.
- Alphabet Class A shares finished Friday at $319.74, gaining 0.65%. Despite this, the stock dropped 7.8% over the week compared to a 2.0% decline in the Nasdaq Composite.
- Capital expenditures in the second quarter increased twofold to reach $44.9 billion. Free cash flow dropped to negative $5.9 billion, marking its first-ever occurrence in the red.
- Equity securities produced a $99.0 billion gain, contributing $6.26 per share and accounting for roughly 69% of reported quarterly profit.
Shares of Alphabet closed up on Friday, though the stock continued to feel pressure following earnings, trailing the Nasdaq by nearly six percentage points over the past week.
Revenue surpassed expectations, though adjusted earnings fell short by four cents. Investors concentrated on expenditure, cash usage and the strength of earnings.
Current market data indicate a trailing price-to-earnings ratio of around 16.1. This metric makes Alphabet appear less expensive compared to its core business performance.
The main factor was a substantial gain from equity securities, which increased second-quarter profit by $6.26 per share after tax.
This gain accounted for approximately 69% of Alphabet’s reported EPS of $9.11. Initial estimate: excluding just this gain raises the multiple to nearly 23.4 times.
This is not a comprehensive adjusted-earnings forecast. Additional investment gains and accounting items could still be reflected in prior results.
| Investor measure | Latest or Q2 2026 | Comparator | Difference |
|---|---|---|---|
| Trailing P/E | 16.1 times reported | 23.4 times excluding only Q2’s equity gain | +7.3 times |
| Capital spending/revenue | 37.5% | 23.3% in Q2 2025 | +14.2 points |
| Free cash flow | -$5.9 billion | +$5.3 billion in Q2 2025 | -$11.2 billion |
| Google Cloud operating margin | 35.6% | 20.7% in Q2 2025 | +14.9 points |
Initial estimates rely on Friday’s closing price and Alphabet’s disclosure. The adjusted price-to-earnings ratio excludes solely the reported $6.26 impact.
The market’s worries are evident in cash flow trends. Operating cash grew by 41% to reach $39.1 billion, but capital expenditures also rose twofold.
The core businesses stayed robust. Revenue grew by 24% to reach $119.8 billion, with Search revenue up 17%.
Google Cloud posted an 82% jump in revenue, reaching $24.8 billion. Operating income climbed over three times higher to $8.8 billion.
To put it in perspective, Cloud operating income represented 19.6% of total capital expenditure for the quarter. This ratio was up from 12.6% in the same period last year, despite group free cash flow moving into negative territory.
Chief Financial Officer Anat Ashkenazi stated, “The demand still outpaces that investment.” Alphabet intends to add more third-party capacity in the third quarter, a move expected to weigh on Cloud margins. Alphabet Investor Relations
Another indicator of expanding infrastructure came on Friday as Verizon Communications NYSE:VZ announced it had signed a Google dark-fiber deal valued at over $1 billion.
The market is split. No fewer than 20 brokerages boosted their price targets for Alphabet following the earnings, setting the median target at $430.
Peter Andersen, CEO at Andersen Capital Management, expressed a contrasting opinion: “The fear of missing out is becoming more like a fear of massive overbuilding.” Reuters
The focus turns to direct competitors next week. Microsoft NASDAQ:MSFT, Amazon.com NASDAQ:AMZN, and Meta Platforms NASDAQ:META are set to release their results.
| Company | Capex as % of revenue (estimate) | Ratio, previous year |
|---|---|---|
| Meta Platforms | 54.9% | 35.9% |
| Microsoft | 45.0% | 31.0% |
| Alphabet | 41.0% | 23.0% |
| Amazon.com | 25.0% | 18.0% |
Thursday’s analyst estimates; companies report on different fiscal calendars.
The results will indicate if Alphabet stands apart or serves as a model. The Federal Reserve’s decision on Wednesday introduces another valuation benchmark.
Risks: Alphabet anticipates that margins will face pressure in the short term due to rented computing capacity. The company also projects a sharp increase in capital expenditures in 2027.
The following proof point is straightforward. Operating cash needs to start aligning more closely with infrastructure spending.
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